SD Midweek Update: With the event that took place in gold yesterday, it seems the pain is not over, but it’s nothing to fear either. Here’s why…
What was that event?
Gold lost it’s 50-day moving average yesterday:
In the beginning of March, 2017, we spent five days below the average before surging higher.
I’m expecting that kind of performance this time around too, because we have been stuck in a sideways channel basically all year long. It’s hard to imaging having to endure a stretch like last October through mid-December. Gold is so beat up that if we do have extended pain coming, gold would be the absolute “no-brainer” trade of the year (along with silver).
But I’m expecting about five days. That would put us bottoming next Tuesday. More on the significance of that later.
Regardless, the theme is now “lower for longer”.
Hopefully a la March 2017, but we know not to put it past the cartel to really bring the pain.
Silver has been under the moving average for some time, and now that gold has joined in the party, let’s not expect silver to get moving here:
It’s hard to imagine reaching the end of the pennant and going lower, so in an effort to remain optimistic, I’ve drawn a break-out.
There’s not many days left in the development however, so we’ll know soon enough. That “soon enough” also supports my argument that the downside in gold should be short-lived.
This brings up an interesting point. Next week we’re coming up on the ninth anniversary of the S&P 500 666 low print. That happened on March 6th, 2009.
In other words: 03-06-09 + 9.
The Deep State/Global Elite/Shadow Government/Satanic Occult/Whatever You Want To Call Them love playing and toying with their numbers, so I won’t be surprised one bit if we fall all the way to March 6th, and find the short-term bottom next Tuesday, exactly on that anniversary.
Besides, we still have to get through another Powell Congressional Love Fest tomorrow – this time, before the Senate.
And the cartel love’s its Fed Head prep-work.
While we might put in the low print next Tuesday, we’re not out of the woods completely, because there’s the February Jobs Report next Friday, but at this point, we’re getting way ahead of ourselves. Let’s just get through this week first.
As such, the gold to silver ratio is still providing a wonderful arbitrage opportunity for those who understand that there’s a reason people calculate averages and there’s a reason things revert to the mean:
At over 80 ounces of silver for every single ounce of gold, we’re well at the extreme in the ratio. The ratio will come down, but with what happened yesterday in gold, I wouldn’t be expecting it to for another week.
Look, I’d love a rally here as much as the next stacker. But we have to be realistic about things. You may not think that technicals matter, but there’s a whole group of traders, hedge funds, analysts, and institutions that do.
So let’s look at that most basic of indicators, the 50-day moving average, and let’s see how important it is.
Platinum looks set to fall below the average price of the last fifty days:
The last time that happened back in September of 2017, platinum spent the better part of three months underneath the average.
Palladium can’t get back up through it’s 50-day:
The moving average in last year’s “Precious Metal of the Year” is acting as textbook resistance.
Copper has been confusing people for over a year all because of the dance it’s done around the average:
It’s been relentlessly charging higher, but every break-out and break-down brings out the bulls and the bears in droves. It looks like we’re about to hear from the bears on the status of Dr Copper.
Crude has been dancing around the 50-day as well:
But just like with copper, the price of oil is in a relentless climb higher. Often it’s called, “climbing the wall of worry”. Especially when the underlying, in this case crude, makes the kind of correction like it did at the end of January.
Of course, when you’re President Trump and the Fed’s baby, this 50-day gets protected:
Whoulda thunked it? We’ll be at record highs in the Dow to mark the nine year anniversary of the lows.
That’s my call: Record high in the Dow next Tuesday culminating with putting in the lows for gold & silver.
Granted, I’m probably wrong on the record high Dow part of the call, because I don’t spend my time in the stock market like I do in gold & silver, but I hope I’m right on the gold & silver part of the call, because if I’m wrong, it’s probably not a bad call made in our favor but rather that we’re still lower for longer.
It’s just really hard to see much more downside in gold & silver from here. There’s just too many fundamental factors acting as a floor:
- Rising interest rates (inflation hedge)
- Falling dollar (good for gold)
- Rising cost of oil (higher production costs)
- Geo-politics (gold is a hedge against uncertainty)
- Rising deficits, tax cuts and a possible infrastructure spend (money printing is good for gold)
That’s just the first five fundamental reasons that come to mind explaining why there is a limited downside in the prices for gold & silver.
Speaking of calls:
Last time I checked, $10,400 was not $13,888.
Is Bitcoin going to surge $3,488 today?
I wouldn’t bet on it.
But back to the 50-day moving average analysis.
It’s going to be hard for the Greenback to break-out and above its 50-day:
Not only is it untested resistance since last early December, but the dollar has whole number resistance and technical resistance at 91 to worry about.
Granted, if you read my post yesterday, you will understand that the ESF is in there, and for whatever reason, they seem to be in control, and that control wants the dollar between 90 and 91 right now.
They will have control until they don’t.
Nothing lasts forever and after running the dollar in the dirt since 1934 when the ESF was created, and after picking up speed since 1971 when Nixon closed the gold window, we’re close to the point of losing control.
Somewhat amusingly, even the VIX is playing along with the 50-day moving average:
You see, what was resistance becomes support, and what was support becomes resistance.
So in the case of the VIX, the 50-day is support.
Granted, the VIX has been neutered for the better part of a year, and the 50-day and amazingly the 200-day moving averages are essentially flat-lined, but it still shows that technicals matter. Notice the VIX came down and bounced off of the moving average yesterday.
There is, however, a wildcard in all of this:
Yeah, I know: The boring yield on the 10-Year Treasury Note.
But here’s the thing: That’s sure looking like consolidation between 2.8% and 2.9%, and yesterday we closed above 2.9%.
If the yield starts rising, that could wreak all kinds of havoc on the markets, especially once we get above the all-important 3% level.
I said 3% in all honesty is price in, because everybody and their brother have their eyes glued to the 10-year waiting for the cross, but, if the yield continues to consolidate, that could bring on a complacency that, if yield then surges, that complacency could catch traders, market participants, and other interested parties off-guard.
– Half Dollar